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British Pound Weekly Outlook: Watching Risk Sentiment, BOE’s Rate, QE Decision


British Pound Traders will be watching risk sentiment drivers, especially the leading indicators this week for US jobs data on Friday, and also the BoE’s hints about future policy moves.









British Pound Outlook: Neutral


-    Events: MON- Manufacturing PMI, TUES- Halifaz HPI m/m, WED-Service PMI, THURS- Asset Purchase Facility, MPC Rate St., Official Bank Rate/ Min. Bid Rate

-    UK GDP rises less than expected, but expectations so low markets minimize drop-still shows economy emerging from recession

-    GfK consumer confidence suggests UK sentiment is improving

-    Comments from BOE’s Sentance suggest QE could end in coming week, providing potential for bounce



The British pound was lower vs. most other majors this week as GBPUSD broke down from a wedge formation and EURGBP bounced from support at 0.8653. The only UK data on hand was actually positive, as the Nationwide house price index rose for a ninth straight month in January, this time by 1.2 percent, which pushed the annual rate up to a 2+ year high of 8.6 percent from 5.9 percent.


As arguably the weakest of the risk currencies, the GBP/USD was down hard, and indeed has been sporting a “death cross,” with the 50 day Simple Moving Average crossing below the 200 day SMA for over three weeks now, suggesting more downward momentum to come, as the pair has been crashing through support levels and showing lots of technical weakness



Looking ahead to next week, , traders will be looking toward the BOE’s policy statement, which has consistently been the prime “news event” of recent rate decisions. No one actually expects a change in rates, at least not an increase.


Last month, the BOE indicated that they would likely wait until their February meeting before considering any changes to the Asset Purchase Facility (NYSE:APF), which is currently aiming to purchase £200 billion worth of high quality assets. At this point, the markets are betting that the BOE will end the program altogether, which has to the potential to push the British pound higher. However, if the central bank displays lack of resolve on this, or leaves room open for later increases, it could drive the  pound lower.


In sum, British Pound traders will be watching overall risk sentiment for most of the week, especially news connected to Friday’s US jobs reports, and also taking cues from any comments made by BOE officials.